Canadian multinationals that do business in the United States and U.S. individuals living in Canada should start to prepare for upcoming U.S. legislative proposals. The United States has now released legislative text for these proposed changes that includes long-awaited details on corporate and individual tax increases, as well as new tax incentives and credits. Although the tax proposals are similar to those previously announced by the Biden administration, there are also important differences that should be considered when assessing the effect of these tax changes. Under these most recent changes, the corporate tax rate is now proposed to increase to 26.5% (from 21%), and the top marginal individual income tax rate would rise to 39.6% (from 37%), among other amendments.

While these potential measures may soon be presented for approval by the House of Representatives, they may face legislative challenges due to the Democrat's narrow control of U.S. Congress. It's not yet clear how these challenges may affect any legislative proposals or the enactment process. While these changes would generally be effective January 1, 2022 with some exceptions, Congress will ultimately determine the effective dates of any legislation, as well as any transition and grandfather rules. It's also possible that there may be significant modifications made to the proposals as they are considered in Congress.

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